Steel price hikes worry bedding execs
By David Perry -- Furniture Today, February 22, 2004
HIGH POINT — HIGH POINT — Facing what they describe as an unprecedented series of hikes in steel prices, major bedding producers are weighing options that include raising their prices to retailers, seeking alternative sources of supply overseas, and remerchandising their product lines.
Price hikes from top components supplier Leggett & Platt, which started last fall, could total as much as 20%, the producers said they have been told. They got steel-goods increases from Leggett & Platt of 6% and 4.6% last fall, and have been told to expect a third increase shortly.
L&P officials said they also aren't happy about the situation. Global forces are driving the "horrific inflation" in steel prices, they said. The size of the third price hike has not been determined, according to L&P.
The price hikes could boost retail price points up a notch, bedding producers speculated. A bed retailing at $699 in queen could become $749. But they noted that every retailer will make his own decisions on pricing.
Bedding producers say the price hikes leave them in a difficult situation. Several are considering alternative suppliers.
"Somewhere in China there is a coil producer clicking his heels in delight," said Gerry Borreggine, vice president of sales and marketing at Therapedic. "He can't believe his good fortune."
Therapedic licensees are considering other supply sources, Borreggine said.
"We must protect the retailers," he said. "They are the ones that are hung out to dry. Retail price points could be affected."
Bedding producers, who seldom raise prices of in-line goods, have little room to maneuver, according to Borreggine. "To maintain price points, something will have to come out of the product. That's what happens as the costs move upward. There is no magic to this."
"It's an unmanageable situation," said Jim Nation, Spring Air president. "When a producer can't manage the cost of raw materials, he will be forced to look at alternatives." Switching to overseas suppliers "has to be considered," he said.
He quipped that bedding producers need to start issuing price lists written in pencil. "Maybe we should put on our price lists that we are offering the market price, like the fish of the day," he said.
Nation said the price hikes could stimulate interest in specialty sleep products that use little or no steel. "There is already a tremendous interest in foam bedding at higher price points," he said. "This might be the impetus to develop stronger promotional to medium-priced foam programs."
King Koil President Larry McKay said he has never seen price hikes like these in his 27 years in the industry. The timing, coming just after King Koil put major new bedding programs in the field, "is awful," he said.
"Everyone will have to look at all options," McKay said. "We will look at every opportunity to mitigate the damage of these price increases."
Ed Lilly, Serta's president, said the steel increases stem from global economic forces. "This is not a Leggett & Platt issue," he said. "This is a global issue. It is real."
Serta has investigated alternative sources of supply, including China, but found no market advantage, Lilly said.
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